Chapter 1:
Vocabulary:
Constraint:
A mathematical relationship that represents limited resources of minimum levels of activity
Data: pieces of information from the problem environment
Decision variable: a variable whose value represents a potential decision (EX: max z=$20x-5x (the x))
Fixed costs: independent of the volume of units produced and sold and remain constant
Functional relationship: the equation as a whole.
Model: functional relationship that includes variables, parameters, and equations.
Objective function: a mathematical relationship that represent the object of a problem solutions (model)
Parameters: known, constant values that are often coefficients of variables in equations (numbers $20 &
$5) Usually remain constant
Variable costs: are determined on a per-unit basis
Volume: level of sales or production of a company (number of units, dollar amount, % of total capacity)
Symbols:
v- volume
C
v
– variable cost
C
f
– fixed cost
Management science is the application of a scientific approach to solving management problems in order
to help manager make better decisions. (Operations research, quantitative methods, quantitative analysis,
and decision sciences)
Scientific method(management process):
1)Observation-Identification of a problem
2)Problem definition-defines the limits and the degree to which it pervades other units of the
organization. Also defines goals or objectives of the firm.
3)Model Construction- a model is an abstract representation of the problem (graph, chart, equation)
4)Solution- The solution to a problem is not a decision but rather just information. Can be either a
recommended decision or information that helps a manager make a decision.
5)Implementation-Actual use of the model once it has been develop

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Operations research began in WWII
Break even analysis (profit analysis)-
where total revenue equals total cost and profit is 0
The three components of Break even analysis include volume, cost, and profit.

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